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Nowadays, credit card payment is the preferred form of making purchases, both online and offline. Credit cards make it simple to buy things ...
Nowadays, credit card payment is the preferred form of making purchases, both online and offline. Credit cards make it simple to buy things with a single tap or swipe. However, card users also have to repay their credit card bills which come with higher credit card interest rates, if not paid on the due date. Meanwhile, credit cards are also used for making bigger purchases or paying during financial emergencies. The repayment of such credit card payments can be troublesome for users as EMI calculation is a tedious process. Here, the credit card EMI calculator is very helpful to plan your payments.

A credit card EMI calculator is a great way to organise your finances and make debt repayment more reasonable. This post will explain how an EMI calculator for a credit card works and why you should use one.

The EMI Calculator for Credit Cards: What Is It?

If you want to know how much your monthly payments will be for a loan or a credit card transaction, you can use an EMI (Equated Monthly Instalment) calculator. It's a calculator that you can use to figure out how much money you'll owe each month, depending on the loan's principal, the interest rate, and the length of the loan. With the help of an online credit card EMI calculator, you can determine your monthly payments for various loan amounts and terms to find the best option for your financial situation.

The EMI Calculator: How Does It Work with Credit Cards?

The three inputs for a credit card EMI calculator are the loan's principal, interest rate, and repayment period. The sum borrowed or the sum to be converted into EMI is referred to as the "principal amount." A loan's interest rate is the annual percentage rate at which the lending institution adds new money to the initial loan balance. The loan tenure is the time frame over which loan payments will be made. The EMI calculator uses the following formula:

Formula: EMI = [P x R x (1+R)N]/[(1+R)^N-1] Where:
• EMI = Equated Monthly Statement
• Simplifying: P = Primary Amount
• Where: R = Interest Rate (per month)
• The Number N Denotes the Length of the Loan (in months)

Below is an example to help you understand this formula. Let's say you want to buy a laptop for Rs. 50,000 on credit, and the bank is willing to lend you the money for 12 months at an interest rate of 15% per annum. Your EMI per month will be determined using the following formula:

• EMI = [50000 x 0.0125 x (1+0.0125)^12]/[(1+0.0125)^12-1]
• EMI = Rs. 4,477

Your equated monthly instalment (EMI) over 12 months will be Rs. 4,477. This payment will cover the principal and the interest owed to the lending institution.

The usefulness of an EMI Calculator for Credit Cards

• There are a few advantages to using an EMI calculator for your credit card: An EMI calculator for your credit card can be helpful for budgeting and financial planning. You can figure out your monthly payments and pick the option that works best for you.
• A credit card EMI calculator can help you determine which loan term and interest rate combination will result in the most savings on interest payments over time.
• Instalment payments are more manageable than a single large payment. With the help of an EMI calculator for credit card payments, you may divide your monthly payments into more manageable chunks.
• The credit card EMI calculator is a free-to-use tool available on the websites of leading banks like Kotak Mahindra Bank and is very handy. You can use it whenever, anywhere, and you'll see results immediately.

Reasons Why Instalment Payments Are Better Than a Single Payment When Using a Credit Card

Some benefits of paying for your credit card purchases in instalments over time are listed below.

• The interest rate applicable to your EMI will vary from one card issuer to another. The chosen tenure to pay off the balance affects the interest rate. Interest rates tend to be lower for shorter loan terms and higher for longer ones.
• Most banks use the declining balance approach to calculate interest on customer accounts. After each month, the outstanding loan balance will be subject to the interest rate. Interest is often calculated based on the remaining balance; therefore, in the above example, if you bought something costing Rs.30,000 and paid Rs.5,000 upfront, you would be charged interest on Rs.25,000. This will result in lower monthly interest payments.

Considerations for Those Considering a Credit Card Instalment Plan

Paying in instalments is an option not available with all credit cards.

First, verify that your credit card issuer supports converting purchases to EMIs. There have been instances where credit card users are unaware of whether their card supports a particular feature before finalising their purchase.

With an EMI purchase, your credit card limit will be decreased.

When using the EMI option to buy something costing Rs.30,000. Every purchase, whether paid for in whole or with EMI, impacts your available funds. By choosing the EMI option, you immediately have Rs.30,000 less available credit. Thus, if your credit limit is Rs. 50,000 and you spend Rs. 30,000, you will only be able to spend Rs. 20,000. Maintaining timely EMI payments will normalise your credit limit gradually.

You can haggle about the EMI processing cost.

If you want to pay off your loan in monthly instalments, the bank will likely assess a processing fee in addition to the total loan amount. The cost will vary from card to card and purchase to purchase, but it will always be a tiny percentage of the loan amount or a flat sum. If you have a solid repayment history and demonstrate responsible credit behaviour, you can obtain a waiver from your bank.

So, before converting your purchase with a credit card into an EMIs, use a credit card EMI calculator and plan your repayments without hassle.

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SIMPLE TAX INDIA: How Does Credit Card Emi Calculator Work?
How Does Credit Card Emi Calculator Work?